Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 - Seritage Growth Properties | srg-ex992_6.htm |
| 8-K - 8-K - Seritage Growth Properties | srg-8k_20180802.htm |
Exhibit 99.1
Seritage Growth Properties Reports Second Quarter 2018 Operating Results
New York, NY – August 2, 2018 – Seritage Growth Properties (NYSE: SRG) (the “Company”), a national owner of 248 retail properties totaling approximately 39 million square feet of gross leasable area (“GLA”), today reported financial and operating results for the three and six months ended June 30, 2018.
Summary of Financial Results
For the three months ended June 30, 2018:
|
• |
Net loss attributable to common shareholders of $8.0 million, or $0.23 per diluted share |
|
• |
Total Net Operating Income (“Total NOI”) of $36.5 million |
|
• |
Funds from Operations (“FFO”) of $6.5 million, or $0.12 per diluted share |
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• |
Company FFO of $8.5 million, or $0.15 per diluted share |
For the six months ended June 30, 2018:
|
• |
Net income attributable to common shareholders of $1.1 million, or $0.03 per diluted share |
|
• |
Total Net Operating Income (“Total NOI”) of $73.3 million |
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• |
Funds from Operations (“FFO”) of $17.5 million, or $0.31 per diluted share |
|
• |
Company FFO of $21.0 million, or $0.38 per diluted share |
“We are pleased with our strong second quarter highlighted by 853,000 square feet of newly signed leases and the commencement of five new redevelopment projects and one expansion project for a total investment of $58.2 million. Our annual base rent from diversified, non-Sears tenants is now approximately $127.3 million, or 57% of total rent, including all signed leases, and a 190% increase since our inception three years ago,” said Benjamin Schall, President and Chief Executive Officer. “Additionally, as we continue to position Seritage as a preferred partner for institutional capital providers, we were pleased to form two new joint ventures with equity partners this quarter to own and redevelop our properties in La Jolla, California and West Hartford, Connecticut. And, subsequent to the quarter end, we announced a new $2.0 billion term loan with Berkshire Hathaway, a transformational step for the company and one that provides our platform with enhanced liquidity and flexibility to further capitalize on our pipeline of opportunities.”
Operating Highlights
During the quarter ended June 30, 2018, including the Company’s proportional share of its unconsolidated joint ventures:
|
• |
Signed new leases totaling 853,000 square feet at an average rent of $14.19 PSF. Since the Company’s inception in July 2015, new leasing activity has totaled nearly 6.1 million square feet at an average rent of $17.45 PSF. |
|
• |
Achieved releasing multiples of 3.6x for space currently or formerly occupied by Sears Holdings Corporation (“Sears Holdings” or “Sears”), with new rents averaging $14.19 PSF compared to $3.96 PSF paid by Sears Holdings. Since inception, releasing multiples have averaged 4.1x, with new rents at $17.58 PSF compared to $4.32 PSF paid by Sears Holdings. |
|
• |
Increased annual base rent from diversified, non-Sears tenants to 56.9% of total annual base rent from 44.0% in the prior year period, including all signed leases and net of rent attributable to associated space to be recaptured. Diversified, non-Sears rental income has increased by over 190% since inception to $127.3 million, including all signed leases. |
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• |
Annualized Total NOI was an estimated $209.1 million, including all signed leases and net of rent attributable to associated space to be recaptured. |
1
During the quarter ended June 30, 2018:
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• |
Announced five new redevelopment projects and expanded one previously announced project representing an aggregate incremental investment of $58.2 million. Total redevelopment program to date includes 88 projects completed or commenced representing over $1.3 billion of estimated capital investment. |
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• |
Formed a joint venture partnership to own The Collection at UTC, the 226,200 SF redevelopment of the former Sears store and auto center at Westfield UTC in La Jolla, California. The transaction valued the property at approximately $165.0 million, including costs remaining to complete the project. |
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• |
Formed a joint venture partnership to own The Corbin Collection, the 163,700 SF redevelopment of the former Sears store and auto center in West Hartford, CT. The transaction valued the property at approximately $52.0 million, including costs remaining to complete the project. |
In addition, subsequent to the quarter end, the Company entered into a new $2.0 billion term loan facility with Berkshire Hathaway Life Insurance Company. The term loan facility, which matures on July 31, 2023, provided for an initial funding of $1.6 billion at closing and includes a committed $400 million incremental funding facility.
Financial Results
Net Income / Net Loss
For the three months ended June 30, 2018, net loss attributable to Class A and Class C shareholders was $8.0 million, or $0.23 per diluted share, as compared to a net loss of $21.2 million, or $0.63 per diluted share, for the prior year period. For the six months ended June 30, 2018, net income attributable to Class A and Class C shareholders was $1.1 million, or $0.03 per diluted share, as compared to a net loss of $41.1 million, or $1.22 per diluted share, for the prior year period.
Total NOI
For the three months ended June 30, 2018, Total NOI, which includes the Company’s proportional share of NOI from properties owned through investments in its unconsolidated joint ventures, was $36.5 million as compared to $44.7 million for the prior year period. For the six months ended June 30, 2018, Total NOI was $73.3 million as compared to $91.6 million for the prior year period.
The decrease in Total NOI in both periods was driven primarily by reduced rental income under the master lease with Sears Holdings as a result of recapture and termination activity at our wholly-owned properties. Since inception, approximately 13.3 million square feet of leased space, representing approximately $52.2 million of annual base rent, has been taken offline through recapture and termination activity. The Company has signed new leases totaling approximately 6.1 million square feet to diversified, non-Sears tenants for an aggregate annual base rent of approximately $106.0 million. The majority of our remaining signed but not opened (“SNO”) leases, which totaled $70.6 million as of June 30, 2018, are expected to begin paying rent over the next 6-18 months and, subject to additional recapture and termination activity, the Company expects Total NOI to increase as SNO leases convert to rent paying and as the Company signs new leases with diversified, non-Sears tenants to occupy currently unleased space.
In addition, the Company sold its interests in 13 unconsolidated joint venture properties and 50% interests in five wholly-owned properties in the second half of 2017 and sold 50% interests in three wholly-owned properties in the first half of 2018, which contributed to the decrease in Total NOI.
FFO and Company FFO
For the three months ended June 30, 2018, FFO, as calculated in accordance with NAREIT, was $6.5 million, or $0.12 per diluted share, as compared to $23.8 million, or $0.43 per diluted share, for the prior year period. For the six months ended June 30, 2018, FFO was $17.5 million, or $0.31 per diluted share, as compared to $54.8 million, or $0.99 per diluted share, for the prior year period.
For the three months ended, June 30, 2018, Company FFO was $8.5 million, or $0.15 per diluted share, as compared to $25.7 million, or $0.46 per diluted share, for the prior year period. For the six months ended June 30, 2018, Company FFO was $21.0 million, or $0.38 per diluted share, as compared to $52.7 million, or $0.95 per diluted share, for the prior year period.
The decreases in FFO and Company FFO in both periods were driven by the same factors driving the decrease in Total NOI, as well as lower termination fee income, lower straight-line rent as a result of recapture and termination activity at our properties, higher G&A expenses driven by our growing platform and the outperformance of targets related to performance-based restricted stock, and dividends related to preferred equity issued in the fourth quarter of 2017.
2
As of June 30, 2018, the Company’s portfolio included interests in 248 retail properties totaling approximately 39 million square feet of gross leasable area, including 222 wholly-owned properties and 26 properties owned through investments in unconsolidated joint ventures. The Company’s portfolio includes 119 properties attached to regional malls and 129 shopping center or freestanding properties.
The portfolio was 81.3% leased, including unconsolidated joint ventures at the Company’s proportional share, and included 58 properties leased only to diversified, non-Sears tenants, 85 properties leased to Sears Holdings and one or more diversified, non-Sears tenants, and 81 properties leased only to Sears Holdings; 24 properties in the portfolio were vacant as of June 30, 2018. Of the properties leased to Sears Holdings, 124 operated under the Sears brand and 42 operated under the Kmart brand.
The unleased space as of June 30, 2018 included approximately 2.1 million SF of remaining lease-up at announced redevelopment projects, and approximately 4.7 million SF of additional leasing opportunity at properties in the Company’s redevelopment pipeline.
During the quarter ended June 30, 2018, the Company formed two new joint venture partnerships to own The Collection at UTC and the Corbin Collection, redevelopments of former Sears stores in La Jolla, CA and West Hartford, CT, respectively, and sold a former Sears store and redeveloped auto center in Hagerstown, MD.
Leasing Update
During the quarter ended June 30, 2018, the Company signed new leases totaling 853,000 square feet at an average annual base rent of $14.19 PSF. On a same-space basis, new rents averaged 3.6x prior rents for space currently or formerly occupied by Sears Holdings, increasing to $14.19 PSF for new tenants compared to $3.96 PSF paid by Sears Holdings across 853,000 square feet.
The table below provides a summary of the Company’s leasing activity since inception, including unconsolidated joint ventures presented at the Company’s proportional share:
|
(in thousands except number of leases and PSF data) |
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|
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|
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|
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Total |
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Release of Sears Holdings Space |
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Leased |
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Annual |
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|
Annual |
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|
|
|
|
|
Leased |
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Annual |
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|
Annual |
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|
Releasing |
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|||||||
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Period |
|
Leases |
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|
GLA |
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|
Rent |
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|
Rent PSF |
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|
Leases |
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|
GLA |
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Rent |
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|
Rent PSF |
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Multiple |
|
|||||||||
|
2015 |
|
|
9 |
|
|
|
154 |
|
|
$ |
4,650 |
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|
$ |
30.28 |
|
|
|
6 |
|
|
|
130 |
|
|
$ |
3,820 |
|
|
$ |
29.41 |
|
|
|
4.4 |
x |
|
2016 |
|
|
65 |
|
|
|
2,070 |
|
|
|
36,600 |
|
|
|
17.68 |
|
|
|
59 |
|
|
|
1,882 |
|
|
|
33,610 |
|
|
|
17.86 |
|
|
|
4.5 |
x |
|
2017 |
|
|
94 |
|
|
|
2,606 |
|
|
|
44,717 |
|
|
|
17.16 |
|
|
|
86 |
|
|
|
2,476 |
|
|
|
43,299 |
|
|
|
17.49 |
|
|
|
4.0 |
x |
|
Q1 2018 |
|
|
20 |
|
|
|
391 |
|
|
|
7,915 |
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20.24 |
|
|
|
19 |
|
|
|
389 |
|
|
|
7,891 |
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|
|
20.29 |
|
|
|
4.1 |
x |
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Q2 2018 |
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|
43 |
|
|
|
853 |
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|
|
12,100 |
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|
|
14.19 |
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|
|
43 |
|
|
|
853 |
|
|
|
12,100 |
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|
|
14.19 |
|
|
|
3.6 |
x |
|
Total |
|
|
231 |
|
|
|
6,074 |
|
|
$ |
105,982 |
|
|
$ |
17.45 |
|
|
|
213 |
|
|
|
5,730 |
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|
$ |
100,720 |
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|
$ |
17.58 |
|
|
|
4.1 |
x |
During the quarter ended June 30, 2018, the Company added $12.1 million of new diversified, non-Sears income and increased annual base rent attributable to diversified, non-Sears tenants to 56.9% of total annual base rent from 44.0% as of June 30, 2017, including all signed leases and net of rent attributable to the associated space to be recaptured.
The table below provides a summary of all the Company’s signed leases as of June 30, 2018, including unconsolidated joint ventures presented at the Company’s proportional share:
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(in thousands except number of leases and PSF data) |
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Number of |
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Leased |
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% of Total |
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Annual |
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% of Total |
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Annual |
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|
Tenant |
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Leases |
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GLA |
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Leased GLA |
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Rent |
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|
Annual Rent |
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|
Rent PSF |
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|
Sears Holdings (1) |
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166 |
|
|
|
21,253 |
|
|
|
71.9 |
% |
|
$ |
96,567 |
|
|
|
43.1 |
% |
|
$ |
4.54 |
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|
In-place diversified, non-Sears leases |
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234 |
|
|
|
4,355 |
|
|
|
14.7 |
% |
|
|
56,778 |
|
|
|
25.4 |
% |
|
|
13.04 |
|
|
SNO diversified, non-Sears leases |
|
|
144 |
|
|
|
3,963 |
|
|
|
13.4 |
% |
|
|
70,560 |
|
|
|
31.5 |
% |
|
|
17.80 |
|
|
Sub-total diversified, non-Sears leases |
|
|
378 |
|
|
|
8,318 |
|
|
|
28.1 |
% |
|
|
127,338 |
|
|
|
56.9 |
% |
|
|
15.31 |
|
|
Total |
|
|
544 |
|
|
|
29,571 |
|
|
|
100.0 |
% |
|
$ |
223,905 |
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|
|
100.0 |
% |
|
$ |
7.57 |
|
|
(1) |
Leases reflects number of properties subject to the Master Lease and JV Master Leases. |
3
Wholly-Owned Properties
During the quarter ended June 30, 2018, the Company commenced five new redevelopment projects representing an estimated total investment of $53.4 million and expanded one previously announced project representing an estimated incremental and total investment of $4.8 million and $11.3 million, respectively.
The table below summarizes project commencements in the Company’s wholly-owned portfolio since inception:
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(in thousands) |
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Estimated |
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Estimated |
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||
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Number |
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|
Project |
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|
Development |
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|
Project |
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||||
|
Quarter |
|
of Projects |
|
|
Square Feet |
|
|
Costs (1) |
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|
Costs (1) |
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Acquired (2) |
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15 |
|
|
|
|
|
|
$ |
63,600 |
|
|
$ |
63,600 |
|
|
2015 |
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5 |
|
|
|
352 |
|
|
|
51,500 |
|
|
|
64,200 |
|
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2016 (3) |
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|
28 |
|
|
|
2,677 |
|
|
|
353,600 |
|
|
|
370,700 |
|
|
2017 (3) |
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30 |
|
|
|
3,517 |
|
|
|
650,000 |
|
|
|
693,600 |
|
|
Q1 2018 |
|
|
5 |
|
|
|
822 |
|
|
|
96,900 |
|
|
|
99,300 |
|
|
Q2 2018 |
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5 |
|
|
|
547 |
|
|
|
53,400 |
|
|
|
53,400 |
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Total |
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|
88 |
|
|
|
7,915 |
|
|
$ |
1,269,000 |
|
|
$ |
1,344,800 |
|
|
(1) |
Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of certain properties. |
|
(2) |
Projects were in various stages of development when acquired by the Company in July 2015. |
|
(3) |
Includes subsequent expansions to previously announced projects. |
As of June 30, 2018, the Company had originated 73 wholly-owned projects since the Company’s inception. These projects represent an estimated total investment of $1,281 million ($1,179 million at share), of which an estimated $881 million ($818 million at share) remains to be spent, and are expected to generate an incremental yield on cost of approximately 11.0%.
The table below provides additional information regarding the Company’s wholly-owned development activity from inception through June 30, 2018:
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(in thousands) |
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Estimated |
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Estimated |
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Estimated |
||
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Number |
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Project |
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Development |
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|
Project |
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Projected Annual Income (2) |
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Incremental |
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Estimated Project Costs (1) |
|
of Projects |
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|
Square Feet |
|
|
Costs (1) |
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|
Costs (1) |
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|
Total |
|
|
Existing |
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|
Incremental |
|
|
Yield (3) |
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|
< $10,000 |
|
|
25 |
|
|
|
1,684 |
|
|
$ |
118,200 |
|
|
$ |
118,200 |
|
|
$ |
20,500 |
|
|
$ |
4,700 |
|
|
$ |
15,800 |
|
|
|
|
$10,001 - $20,000 (4) |
|
|
29 |
|
|
|
3,001 |
|
|
|
380,700 |
|
|
|
400,600 |
|
|
|
57,200 |
|
|
|
15,200 |
|
|
|
41,800 |
|
|
|
|
> $20,001 |
|
|
19 |
|
|
|
3,230 |
|
|
|
706,500 |
|
|
|
762,400 |
|
|
|
104,300 |
|
|
|
21,800 |
|
|
|
82,500 |
|
|
|
|
Announced projects |
|
|
73 |
|
|
|
7,915 |
|
|
$ |
1,205,400 |
|
|
$ |
1,281,200 |
|
|
$ |
182,000 |
|
|
$ |
41,700 |
|
|
$ |
140,100 |
|
|
10.5-11.5% |
|
Acquired projects |
|
|
15 |
|
|
|
|
|
|
|
63,600 |
|
|
|
63,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total projects |
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|
88 |
|
|
|
|
|
|
$ |
1,269,000 |
|
|
$ |
1,344,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Total estimated development costs exclude, and total estimated project costs include, termination fees to recapture 100% of certain properties. |
|
(2) |
Projected annual income includes assumptions on stabilized rents to be achieved for space under redevelopment. There can be no assurance that stabilized rent targets will be achieved. |
|
(3) |
Projected incremental annual income divided by total estimated project costs. |
|
(4) |
Includes Saugus, MA project which has been temporarily postponed while the Company identifies a new lead tenant. |
4
The tables below provide brief descriptions of each of the redevelopment projects originated on the Company’s platform since its inception:
|
Total Project Costs under $10 Million |
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Total |
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Estimated |
|
Estimated |
|
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|
|
|
|
|
|
|
|
|
|
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Project |
|
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Construction |
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Substantial |
|
|
Property |
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Description |
|
Square Feet |
|
|
Start |
|
Completion |
|||||||||
|
King of Prussia, PA |
|
Repurpose former auto center space for Outback Steakhouse, Yard House and small shop retail |
|
|
29,100 |
|
|
Complete |
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|
Merrillville, IN |
|
Termination property; redevelop existing store for At Home and small shop retail |
|
|
132,000 |
|
|
Complete |
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|
Elkhart, IN |
|
Termination property; existing store has been released to Big R Stores |
|
|
86,500 |
|
|
Complete |
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|
San Antonio, TX |
|
Recapture and repurpose auto center space for Orvis, Jared's Jeweler, Shake Shack and small shop retail |
|
|
18,900 |
|
|
Complete |
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|
Bowie, MD |
|
Recapture and repurpose auto center space for BJ's Brewhouse |
|
|
8,200 |
|
|
Complete |
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|
Troy, MI |
|
Partial recapture; redevelop existing store for At Home |
|
|
100,000 |
|
|
Complete |
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|
Roseville, MI |
|
Partial recapture; redevelop existing store for At Home |
|
|
100,400 |
|
|
Complete |
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|
Rehoboth Beach, DE |
|
Partial recapture; redevelop existing store for andThat! and PetSmart |
|
|
56,700 |
|
|
Complete |
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|
Henderson, NV |
|
Termination property; redevelop existing store for At Home, Seafood City, Blink Fitness and additional retail |
|
|
144,400 |
|
|
Complete |
||||||||||
|
Cullman, AL |
|
Termination property; redevelop existing store for Bargain Hunt, Tractor Supply and Planet Fitness |
|
|
99,000 |
|
|
Complete |
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|
Albany, NY |
|
Recapture and repurpose auto center space for BJ's Brewhouse, Ethan Allen and additional small shop retail |
|
|
28,000 |
|
|
Substantially complete |
||||||||||
|
Hagerstown, MD |
|
Recapture and repurpose auto center space for BJ's Brewhouse, Verizon and additional retail Note: property sold in Q2 2018 |
|
|
15,400 |
|
|
Substantially complete |
||||||||||
|
Jefferson City, MO |
|
Termination property; redevelop existing store for Orscheln Farm and Home |
|
|
96,000 |
|
|
Substantially complete |
||||||||||
|
Kearney, NE |
|
Termination property; redevelop existing store for Marshall's, PetSmart and additional junior anchors |
|
|
92,500 |
|
|
Substantially complete |
||||||||||
|
Ft. Wayne, IN |
|
Site densification (project expansion); new outparcels for BJ's Brewhouse and Chick-Fil-A |
|
|
12,000 |
|
|
Substantially complete |
||||||||||
|
Guaynabo, PR |
|
Partial recapture; redevelop existing store for Planet Fitness, Capri and additional retail and restaurants |
|
|
56,100 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Florissant, MO |
|
Site densification; new outparcel for Chick-Fil-A |
|
|
5,000 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Dayton, OH |
|
Recapture and repurpose auto center space for Outback Steakhouse and additional restaurants |
|
|
14,100 |
|
|
Underway |
|
Q4 2018 |
||||||||
|
New Iberia, LA |
|
Termination property; redevelop existing store for Rouses Supermarkets, Hobby Lobby and small shop retail |
|
|
93,100 |
|
|
Underway |
|
Q1 2019 |
||||||||
|
North Little Rock, AR |
|
Recapture and repurpose auto center space for LongHorn Steakhouse and additional small shop retail |
|
|
17,300 |
|
|
Underway |
|
Q2 2019 |
||||||||
|
St. Clair Shores, MI |
|
100% recapture; demolish existing store and develop site for new Kroger grocery store |
|
|
107,200 |
|
|
Underway |
|
Q2 2019 |
||||||||
|
Hopkinsville, KY |
|
Termination property; redevelop existing store for Bargain Hunt, Farmer's Furniture and additional junior anchors and small shop retail |
|
|
87,900 |
|
|
Q3 2018 |
|
Q2 2019 |
||||||||
|
Mt. Pleasant, PA |
|
Termination property; redevelop existing store for Aldi, Big Lots and additional retail |
|
|
86,300 |
|
|
Q3 2018 |
|
Q3 2019 |
||||||||
|
Oklahoma City, OK |
|
Site densification; new fitness center for Vasa Fitness |
|
|
59,500 |
|
|
Q3 2018 |
|
Q3 2019 |
||||||||
|
Gainesville, FL |
|
Termination property; redevelop existing store for Florida Clinical Practice Association / University of Florida College of Medicine |
|
|
139,100 |
|
|
Q4 2018 |
|
Q4 2019 |
||||||||
5
|
Total Project Costs $10 - $20 Million |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Estimated |
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project |
|
|
Construction |
|
Substantial |
|
|
Property |
|
Description |
|
Square Feet |
|
|
Start |
|
Completion |
|||||||||
|
Braintree, MA |
|
100% recapture; redevelop existing store for Nordstrom Rack, Saks OFF 5th and additional retail |
|
|
90,000 |
|
|
Complete |
||||||||||
|
Honolulu, HI |
|
100% recapture; redevelop existing store for Longs Drugs (CVS), PetSmart and Ross Dress for Less |
|
|
79,000 |
|
|
Complete |
||||||||||
|
Anderson, SC |
|
100% recapture (project expansion); redevelop existing store for Burlington Stores, Gold's Gym, Sportsman's Warehouse, additional retail and restaurants |
|
|
111,300 |
|
|
Complete |
||||||||||
|
West Jordan, UT |
|
Partial recapture; redevelop existing store and attached auto center for Burlington Stores and additional retail |
|
|
81,400 |
|
|
Substantially complete |
||||||||||
|
Madison, WI |
|
Partial recapture; redevelop existing store for Dave & Busters, Total Wine & More, additional retail and restaurants |
|
|
75,300 |
|
|
Substantially complete |
||||||||||
|
Thornton, CO |
|
Termination property; redevelop existing store for Vasa Fitness and additional junior anchors |
|
|
191,600 |
|
|
Substantially complete |
||||||||||
|
Springfield, IL |
|
Termination property; redevelop existing store for Burlington Stores, Binny's Beverage Depot, Marshall's, Orangetheory Fitness, Outback Steakhouse, CoreLife Eatery and additional small shop retail |
|
|
133,400 |
|
|
Substantially complete |
||||||||||
|
Orlando, FL |
|
100% recapture; demolish and construct new buildings for Floor & Décor, Orchard Supply Hardware, LongHorn Steakhouse, Mission BBQ, Olive Garden and additional small shop retail and restaurants |
|
|
139,200 |
|
|
Substantially complete |
||||||||||
|
Cockeysville, MD |
|
Partial recapture; redevelop existing store for HomeGoods, Michael's Stores, additional junior anchors and restaurants |
|
|
83,500 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Charleston, SC |
|
100% recapture (project expansion); redevelop existing store and detached auto center for Burlington Stores and additional retail |
|
|
126,700 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
North Hollywood, CA |
|
Partial recapture; redevelop existing store for Burlington Stores and Ross Dress for Less |
|
|
79,800 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Salem, NH |
|
Site densification; new theatre for Cinemark Recapture and repurpose auto center for restaurant space |
|
|
71,200 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Paducah, KY |
|
Termination property; redevelop existing store for Burlington Stores, Ross Dress for Less and additional retail |
|
|
102,300 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Fairfax, VA |
|
Partial recapture; redevelop existing store and attached auto center for Dave & Busters, Seasons 52, additional junior anchors and restaurants |
|
|
110,300 |
|
|
Underway |
|
Q4 2018 |
||||||||
|
North Miami, FL |
|
100% recapture; redevelop existing store for Blink Fitness, Burlington Stores, Michael's and Ross Dress for Less |
|
|
124,300 |
|
|
Underway |
|
Q4 2018 |
||||||||
|
Hialeah, FL |
|
100% recapture; redevelop existing store for Bed, Bath & Beyond, Ross Dress for Less and dd's Discounts to join current tenant, Aldi |
|
|
88,400 |
|
|
Underway |
|
Q4 2018 |
||||||||
|
Warwick, RI |
|
Termination property (project expansion); redevelop existing store and detached auto center for At Home, BJ's Brewhouse, Raymour & Flanigan and additional retail |
|
|
190,700 |
|
|
Underway |
|
Q4 2018 |
||||||||
|
Temecula, CA |
|
Partial recapture; redevelop existing store and detached auto center for Round One, small shop retail and restaurants |
|
|
65,100 |
|
|
Underway |
|
Q4 2018 |
||||||||
|
Canton, OH |
|
Partial recapture; redevelop existing store for Dave & Busters and restaurants |
|
|
83,900 |
|
|
Underway |
|
Q2 2019 |
||||||||
|
North Riverside, IL |
|
Partial recapture; redevelop existing store and detached auto center for Blink Fitness, Round One and additional junior anchors, small shop retail and restaurants |
|
|
103,900 |
|
|
Underway |
|
Q2 2019 |
||||||||
|
Olean, NY |
|
Termination property (project expansion); redevelop existing store for Marshall's, Ollie's Bargain Basement and additional retail |
|
|
125,700 |
|
|
Underway |
|
Q2 2019 |
||||||||
|
Las Vegas, NV |
|
Partial recapture; redevelop existing store for Round One and additional retail |
|
|
78,800 |
|
|
Q3 2018 |
|
Q3 2019 |
||||||||
|
Yorktown Heights, NY |
|
Partial recapture; redevelop existing store for 24 Hour Fitness and additional retail |
|
|
85,200 |
|
|
Q3 2018 |
|
Q4 2019 |
||||||||
|
Santa Cruz, CA |
|
Partial recapture; redevelop existing store for TJ Maxx, HomeGoods and additional junior anchors |
|
|
62,200 |
|
|
Q4 2018 |
|
Q4 2019 |
||||||||
|
El Paso, TX |
|
Termination property; redevelop existing store for Ross Dress for Less, dd's Discounts and additional retail |
|
|
114,700 |
|
|
Q4 2018 |
|
Q4 2019 |
||||||||
|
Warrenton, VA |
|
Termination property; redevelop existing store for Homegoods and additional retail |
|
|
97,300 |
|
|
Q1 2019 |
|
Q3 2019 |
||||||||
|
Pensacola, FL |
|
Termination property; redevelop existing store for Lucky's Market, large format retail and restaurants |
|
|
134,700 |
|
|
Q1 2019 |
|
Q1 2020 |
||||||||
|
Vancouver, WA |
|
Partial recapture; redevelop existing store for Round One and additional retail and restaurants |
|
|
72,400 |
|
|
Q1 2019 |
|
Q2 2020 |
||||||||
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Estimated |
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project |
|
|
Construction |
|
Substantial |
|
|
Property |
|
Description |
|
Square Feet |
|
|
Start |
|
Completion |
|||||||||
|
Memphis, TN |
|
100% recapture; demolish and construct new buildings for LA Fitness, Nordstrom Rack, Ulta Beauty, Hopdoddy Burger Bar and additional junior anchors, restaurants and small shop retail |
|
|
135,200 |
|
|
Substantially complete |
||||||||||
|
West Hartford, CT |
|
100% recapture; redevelop existing store and detached auto center for Buy Buy Baby, Cost Plus World Market, REI, Saks OFF Fifth, other junior anchors, Shake Shack and additional small shop retail Note: contributed to West Hartford JV in Q2 2018 |
|
|
147,600 |
|
|
Substantially complete |
||||||||||
|
St. Petersburg, FL |
|
100% recapture; demolish and construct new buildings for Dick's Sporting Goods, Lucky's Market, PetSmart, Five Below, Chili's Grill & Bar, Pollo Tropical, LongHorn Steakhouse, Verizon and additional small shop retail and restaurants |
|
|
142,400 |
|
|
Substantially complete |
||||||||||
|
Wayne, NJ |
|
Partial recapture (project expansion); redevelop existing store and detached auto center for Cinemark, Dave & Busters and additional junior anchors and restaurants Note: contributed to GGP II JV in Q3 2017 |
|
|
156,700 |
|
|
Underway |
|
Q3 2018 |
||||||||
|
Carson, CA |
|
100% recapture (project expansion); redevelop existing store for Burlington Stores, Ross Dress for Less, Gold's Gym and additional retail |
|
|
163,800 |
|
|
Underway |
|
Q1 2019 |
||||||||
|
Watchung, NJ |
|
100% recapture; demolish full-line store and detached auto center and construct new buildings for Cinemark, HomeSense, Sierra Trading Post, Ulta Beauty and small shop retail and restaurants |
|
|
126,700 |
|
|
Underway |
|
Q2 2019 |
||||||||
|
Santa Monica, CA |
|
100% recapture; redevelop existing building into premier, mixed-use asset featuring unique, small-shop retail and creative office space Note: contributed to Mark 302 JV in Q1 2018 |
|
|
96,500 |
|
|
Underway |
|
Q4 2019 |
||||||||
|
Aventura, FL |
|
100% recapture; demolish existing store and construct new, multi-level open air retail destination featuring a leading collection of experiential shopping, dining and entertainment concepts alongside a treelined esplanade and activated plazas |
|
|
216,600 |
|
|
Underway |
|
Q4 2019 |
||||||||
|
San Diego, CA |
|
100% recapture; redevelop existing store into two highly-visible, multi-level buildings with exterior facing retail space leased to Equinox Fitness and a premier mix of experiential shopping, dining, and entertainment concepts Note: contributed to UTC JV in Q2 2018 |
|
|
206,000 |
|
|
Underway |
|
Q4 2019 |
||||||||
|
Roseville, CA |
|
Termination property (project expansion): redevelop existing store and auto center for Cinemark, Round One, AAA Auto Repair Center and restaurants |
|
|
147,400 |
|
|
Underway |
|
Q2 2020 |
||||||||
|
Austin, TX |
|
100% recapture (project expansion); redevelop existing store for AMC Theatres, additional junior anchors and restaurants |
|
|
177,400 |
|
|
Underway |
|
Q3 2019 |
||||||||
|
Greendale, WI |
|
Termination property; redevelop existing store and attached auto center for Dick's Sporting Goods, Round One and additional junior anchors and restaurants |
|
|
223,800 |
|
|
Underway |
|
Q4 2019 |
||||||||
|
East Northport, NY |
|
Termination property; redevelop existing store and attached auto center for AMC Theatres, 24 Hour Fitness, Floor & Decor and small shop retail |
|
|
179,700 |
|
|
Underway |
|
Q4 2019 |
||||||||
|
Anchorage, AK |
|
100% recapture; redevelop existing store for Guitar Center, Safeway, Planet Fitness and additional retail to join current tenant, Nordstrom Rack |
|
|
142,500 |
|
|
Q3 2018 |
|
Q4 2019 |
||||||||
|
El Cajon, CA |
|
100% recapture; redevelop existing store and auto center for Ashley Furniture, Bob's Discount Furniture, Burlington Stores and additional retail and restaurants |
|
|
242,700 |
|
|
Q3 2018 |
|
Q3 2019 |
||||||||
|
Tucson, AZ |
|
100% recapture; redevelop existing store and auto center for Round One and additional retail |
|
|
224,300 |
|
|
Q3 2018 |
|
Q4 2019 |
||||||||
|
Reno, NV |
|
100% recapture; redevelop existing store and auto center for Round One and additional retail |
|
|
169,800 |
|
|
Q3 2018 |
|
Q4 2019 |
||||||||
|
Fairfield, CA |
|
100% recapture (project expansion); redevelop existing store and auto center for Dave & Busters, AAA Auto Repair Center and additional retail |
|
|
146,500 |
|
|
Q3 2018 |
|
Q1 2020 |
||||||||
|
Plantation, FL |
|
100% recapture (project expansion); redevelop existing store and auto center for GameTime, Powerhouse Gym, additional retail and restaurants |
|
|
184,400 |
|
|
Q4 2018 |
|
Q1 2020 |
||||||||
7
As of June 30, 2018, the Company’s total market capitalization was approximately $3.6 billion. Total market capitalization is calculated as the sum of total debt and the market value of the Company's outstanding shares of common stock, assuming conversion of operating partnership units.
Total debt to total market capitalization was 34.1% and net debt to Adjusted EBITDA was 8.2x. The Company deducts both unrestricted and restricted cash from total debt when calculating net debt. Reconciliations of net income attributable to common shareholders to EBITDA and Adjusted EBITDA, are provided in the tables accompanying this press release.
As of June 30, 2018, the Company had $100.4 million of unrestricted cash and restricted cash of $166.5 million, the substantial majority of which was held in reserve accounts for redevelopment, re-leasing and operating expenses at the Company’s properties.
During the quarter ended June 30, 2018, the Company reduced amounts outstanding under its mortgage loan by $58.4 million and added $7.1 million to its redevelopment reserve as a result of the new joint ventures in La Jolla, CA and West Hartford, CT and the disposition of its property in Hagerstown, MD.
New Term Loan Facility
Subsequent to June 30, 2018, the Company entered into a $2.0 billion term loan facility (the “Term Loan Facility”) with Berkshire Hathaway Life Insurance Company of Nebraska.
The Term Loan Facility, which matures on July 31, 2023, provided for an initial funding of $1.6 billion at closing (the “Initial Funding”) and includes a committed $400 million incremental funding facility (the “Incremental Funding Facility”). Funded amounts under the Term Loan Facility bear interest at a fixed annual rate of 7.00%, while amounts available under Incremental Funding Facility will be subject to a 1.00% annual fee until drawn.
The Company used a portion of the proceeds from the Initial Funding to fully repay its outstanding mortgage loan and unsecured term loan. Net proceeds from the Initial Funding, combined with existing balance sheet cash and the release of cash reserves held by the previous lender as of June 30, 2018, provide the Company with over $600 million of cash liquidity, in addition to access to the $400 million Incremental Funding Facility.
Dividends
The Company expects annual common dividends to adhere to REIT requirements with respect to taxable income which includes both ordinary income and capital gains from the sale of real estate.
On July 24, 2018, the Company’s Board of Trustees declared a third quarter common stock dividend of $0.25 per each Class A and Class C common share. The common dividend will be paid on October 11, 2018 to shareholders of record on September 28, 2018. Holders of units in Seritage Growth Properties, L.P. (the “Operating Partnership”) are entitled to an equal distribution per each Operating Partnership unit held as of September 28, 2018. On July 24, 2018, the Company’s Board of Trustees also declared a preferred stock dividend of $0.4375 per each Series A Preferred Share. The preferred dividend will be paid on October 15, 2018 to holders of record on September 28, 2018.
On April 24, 2018, the Company’s Board of Trustees declared a second quarter common stock dividend of $0.25 per each Class A and Class C common share. The common dividend was paid on July 12, 2018 to shareholders of record on June 29, 2018. Holders of units in the Operating Partnership were entitled to an equal distribution per each Operating Partnership unit held as of June 29, 2018. On April 24, 2018, the Company’s Board of Trustees also declared a preferred stock dividend of $0.4375 per each Series A Preferred Share. The preferred dividend was paid on July 16, 2018 to holders of record on June 29, 2018.
Supplemental Report
A Supplemental Report will be available in the Investors section of the Company’s website, www.seritage.com.
8
The Company makes reference to NOI, Total NOI, EBITDA, Adjusted EBITDA, FFO and Company FFO which are financial measures that include adjustments to accounting principles generally accepted in the United States (“GAAP”).
None of Total NOI, EBITDA, Adjusted EBITDA, FFO or Company FFO, are measures that (i) represent cash flow from operations as defined by GAAP; (ii) are indicative of cash available to fund all cash flow needs, including the ability to make distributions; (iii) are alternatives to cash flow as a measure of liquidity; or (iv) should be considered alternatives to net income (which is determined in accordance with GAAP) for purposes of evaluating the Company’s operating performance. Reconciliations of these measures to the respective GAAP measures we deem most comparable have been provided in the tables accompanying this press release.
Net Operating Income ("NOI”), Total NOI and Annualized Total NOI
NOI is defined as income from property operations less property operating expenses. The Company believes NOI provides useful information regarding Seritage, its financial condition, and results of operations because it reflects only those income and expense items that are incurred at the property level.
The Company also uses Total NOI, which includes its proportional share of unconsolidated properties. This form of presentation offers insights into the financial performance and condition of the Company as a whole given the Company’s ownership of unconsolidated properties that are accounted for under GAAP using the equity method. The Company also considers Total NOI to be a helpful supplemental measure of its operating performance because it excludes from NOI variable items such as termination fee income, as well as non-cash items such as straight-line rent and amortization of lease intangibles.
Annualized Total NOI is an estimate, as of the end of the reporting period, of the annual Total NOI to be generated by the Company’s portfolio including all signed leases and modifications to the Company’s master lease with Sears Holdings with respect to recaptured space. We calculate Annualized Total NOI by adding or subtracting current period adjustments for leases that commenced or expired during the period to Total NOI (as defined) for the period and annualizing, and then adding estimated annual Total NOI attributable to SNO leases and subtracting estimated annual Total NOI attributable to Sears Holdings’ space to be recaptured.
Annualized Total NOI is a forward-looking non-GAAP measure for which the Company does not believe it can provide reconciling information to a corresponding forward-looking GAAP measure without unreasonable effort.
Earnings before Interest Expense, Income Tax, Depreciation, and Amortization for Real Estate ("EBITDAre") and Company EBITDA
EBITDAre is calculated in accordance with the definition set forth by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of EBITDA. EBITDAre is calculated as net income computed in accordance with GAAP, excluding interest expense, income tax expense, depreciation and amortization, gains (or losses) from property sales and impairment charges on depreciable real estate assets. The Company believes EBITDAre provides useful information to investors regarding our results of operations because it removes the impact of the Company’s capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). Management also believes the use of EBITDAre facilitates comparisons between us and other equity REITs and real property owners that are not REITs.
The Company makes certain adjustments to EBITDAre, which it refers to as Company EBITDA, to account for certain non-cash and non-comparable items, such as termination fee income, unrealized loss on interest rate cap, litigation charges, acquisition-related expenses and certain up-front-hiring and personnel costs that it does not believe are representative of ongoing operating results.
Funds from Operations ("FFO") and Company FFO
FFO is calculated in accordance with NAREIT which defines FFO as net income computed in accordance with GAAP, excluding gains (or losses) from property sales, real estate related depreciation and amortization, and impairment charges on depreciable real estate assets. The Company considers FFO a helpful supplemental measure of the operating performance for equity REITs and a complement to GAAP measures because it is a recognized measure of performance by the real estate industry.
The Company makes certain adjustments to FFO, which it refers to as Company FFO, to account for certain non-cash and non-comparable items, such as termination fee income, unrealized loss on interest rate cap, litigation charges, acquisition-related expenses, amortization of deferred financing costs and certain up-front-hiring and personnel costs, that it does not believe are representative of ongoing operating results. The Company previously referred to this metric as Normalized FFO; the definition and calculation remain the same.
9
This document contains forward-looking statements, which are based on the current beliefs and expectations of management and are subject to significant risks, assumptions and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: competition in the real estate and retail industries; our significant exposure to Sears Holdings; Sears Holdings’ termination and other rights under its master lease with us; risks relating to our recapture and redevelopment activities; contingencies to the commencement of rent under leases; the terms of our indebtedness; restrictions with which we are required to comply in order to maintain REIT status and other legal requirements to which we are subject; and our relatively limited history as an operating company. For additional discussion of these and other applicable risks, assumptions and uncertainties, see the “Risk Factors” and forward-looking statement disclosure contained in filings with the Securities and Exchange Commission. While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.
About Seritage Growth Properties
Seritage Growth Properties is a publicly-traded, self-administered and self-managed REIT with 222 wholly-owned properties and 26 joint venture properties totaling approximately 39 million square feet of space across 49 states and Puerto Rico. The Company was formed to unlock the underlying real estate value of a high-quality retail portfolio it acquired from Sears Holdings in July 2015. Pursuant to a master lease, the Company has the right to recapture certain space from Sears Holdings for retenanting or redevelopment purposes. The Company’s mission is to create and own revitalized shopping, dining, entertainment and mixed-use destinations that provide enriched experiences for consumers and local communities, and create long-term value for our shareholders.
Contact
Seritage Growth Properties
646-277-1268
IR@Seritage.com
10
Consolidated Balance SheetS
(In thousands, except share and per share amounts)
(Unaudited)
|
|
|
June 30, 2018 |
|
|
December 31, 2017 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Investment in real estate |
|
|
|
|
|
|
|
|
|
Land |
|
$ |
711,261 |
|
|
$ |
799,971 |
|
|
Buildings and improvements |
|
|
860,739 |
|
|
|
829,168 |
|
|
Accumulated depreciation |
|
|
(157,991 |
) |
|
|
(139,483 |
) |
|
|
|
|
1,414,009 |
|
|
|
1,489,656 |
|
|
Construction in progress |
|
|
209,237 |
|
|
|
224,904 |
|
|
Net investment in real estate |
|
|
1,623,246 |
|
|
|
1,714,560 |
|
|
Real estate held for sale |
|
|
15,139 |
|
|
|
— |
|
|
Investment in unconsolidated joint ventures |
|
|
392,743 |
|
|
|
282,990 |
|
|
Cash and cash equivalents |
|
|
100,448 |
|
|
|
241,569 |
|
|
Restricted cash |
|
|
166,458 |
|
|
|
175,665 |
|
|
Tenant and other receivables, net |
|
|
43,911 |
|
|
|
30,787 |
|
|
Lease intangible assets, net |
|
|
251,303 |
|
|
|
310,098 |
|
|
Prepaid expenses, deferred expenses and other assets, net |
|
|
21,360 |
|
|
|
20,148 |
|
|
Total assets |
|
$ |
2,614,608 |
|
|
$ |
2,775,817 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Mortgage loans payable, net |
|
$ |
1,073,762 |
|
|
$ |
1,202,314 |
|
|
Unsecured term loan, net |
|
|
144,111 |
|
|
|
143,210 |
|
|
Accounts payable, accrued expenses and other liabilities |
|
|
97,541 |
|
|
|
109,433 |
|
|
Total liabilities |
|
|
1,315,414 |
|
|
|
1,454,957 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
Class A common shares $0.01 par value; 100,000,000 shares authorized; 35,678,749 and 32,415,734 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively |
|
|
356 |
|
|
|
324 |
|
|
Class B common shares $0.01 par value; 5,000,000 shares authorized; 1,322,365 and 1,328,866 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively |
|
|
13 |
|
|
|
13 |
|
|
Class C common shares $0.01 par value; 50,000,000 shares authorized; 850 and 3,151,131 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively |
|
|
— |
|
|
|
31 |
|
|
Series A preferred shares $0.01 par value; 10,000,000 shares authorized; 2,800,000 shares issued and outstanding as of June 30, 2018 and December 31, 2017; liquidation preference of $70,000 |
|
|
28 |
|
|
|
28 |
|
|
Additional paid-in capital |
|
|
1,122,251 |
|
|
|
1,116,060 |
|
|
Accumulated deficit |
|
|
(246,650 |
) |
|
|
(229,760 |
) |
|
Total shareholders' equity |
|
|
875,998 |
|
|
|
886,696 |
|
|
Non-controlling interests |
|
|
423,196 |
|
|
|
434,164 |
|
|
Total equity |
|
|
1,299,194 |
|
|
|
1,320,860 |
|
|
Total liabilities and equity |
|
$ |
2,614,608 |
|
|
$ |
2,775,817 |
|
11
Consolidated Statements of OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
35,839 |
|
|
$ |
42,185 |
|
|
$ |
72,918 |
|
|
$ |
91,359 |
|
|
Tenant reimbursements |
|
|
12,517 |
|
|
|
15,708 |
|
|
|
29,215 |
|
|
|
31,932 |
|
|
Management and other fee income |
|
|
914 |
|
|
|
— |
|
|
|
914 |
|
|
|
— |
|
|
Total revenue |
|
|
49,270 |
|
|
|
57,893 |
|
|
|
103,047 |
|
|
|
123,291 |
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating |
|
|
6,533 |
|
|
|
4,932 |
|
|
|
13,774 |
|
|
|
9,674 |
|
|
Real estate taxes |
|
|
9,217 |
|
|
|
11,950 |
|
|
|
20,598 |
|
|
|
24,372 |
|
|
Depreciation and amortization |
|
|
49,551 |
|
|
|
50,571 |
|
|
|
84,218 |
|
|
|
109,234 |
|
|
General and administrative |
|
|
8,673 |
|
|
|
5,093 |
|
|
|
16,470 |
|
|
|
11,367 |
|
|
Provision for doubtful accounts |
|
|
109 |
|
|
|
12 |
|
|
|
170 |
|
|
|
51 |
|
|
Total expenses |
|
|
74,083 |
|
|
|
72,558 |
|
|
|
135,230 |
|
|
|
154,698 |
|
|
Operating loss |
|
|
(24,813 |
) |
|
|
(14,665 |
) |
|
|
(32,183 |
) |
|
|
(31,407 |
) |
|
Equity in loss of unconsolidated joint ventures |
|
|
(2,158 |
) |
|
|
(1,542 |
) |
|
|
(4,740 |
) |
|
|
(540 |
) |
|
Interest and other income |
|
|
456 |
|
|
|
42 |
|
|
|
1,136 |
|
|
|
120 |
|
|
Interest expense |
|
|
(17,862 |
) |
|
|
(18,431 |
) |
|
|
(34,281 |
) |
|
|
(35,023 |
) |
|
Unrealized loss on interest rate cap |
|
|
(172 |
) |
|
|
(124 |
) |
|
|
(7 |
) |
|
|
(595 |
) |
|
Loss before income taxes |
|
|
(44,549 |
) |
|
|
(34,720 |
) |
|
|
(70,075 |
) |
|
|
(67,445 |
) |
|
Provision for income taxes |
|
|
(240 |
) |
|
|
(147 |
) |
|
|
(344 |
) |
|
|
(266 |
) |
|
Loss before gain on sale of real estate |
|
|
(44,789 |
) |
|
|
(34,867 |
) |
|
|
(70,419 |
) |
|
|
(67,711 |
) |
|
Gain on sale of real estate |
|
|
34,187 |
|
|
|
— |
|
|
|
76,018 |
|
|
|
— |
|
|
Net income (loss) |
|
|
(10,602 |
) |
|
|
(34,867 |
) |
|
|
5,599 |
|
|
|
(67,711 |
) |
|
Net (income) loss attributable to non-controlling interests |
|
|
3,831 |
|
|
|
13,648 |
|
|
|
(2,042 |
) |
|
|
26,654 |
|
|
Net income (loss) attributable to Seritage |
|
$ |
(6,771 |
) |
|
$ |
(21,219 |
) |
|
$ |
3,557 |
|
|
$ |
(41,057 |
) |
|
Preferred dividends |
|
|
(1,225 |
) |
|
|
— |
|
|
|
(2,453 |
) |
|
|
— |
|
|
Net income (loss) attributable to Seritage common shareholders |
|
$ |
(7,996 |
) |
|
$ |
(21,219 |
) |
|
$ |
1,104 |
|
|
$ |
(41,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to Seritage Class A and Class C common shareholders - Basic |
|
$ |
(0.23 |
) |
|
$ |
(0.63 |
) |
|
$ |
0.03 |
|
|
$ |
(1.22 |
) |
|
Net income (loss) per share attributable to Seritage Class A and Class C common shareholders - Diluted |
|
$ |
(0.23 |
) |
|
$ |
(0.63 |
) |
|
$ |
0.03 |
|
|
$ |
(1.22 |
) |
|
Weighted average Class A and Class C common shares outstanding - Basic |
|
|
35,483 |
|
|
|
33,766 |
|
|
|
35,449 |
|
|
|
33,638 |
|
|
Weighted average Class A and Class C common shares outstanding - Diluted |
|
|
35,483 |
|
|
|
33,766 |
|
|
|
35,588 |
|
|
|
33,638 |
|
12
Reconciliation of Net Loss to NOI and Total NOI (in thousands)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
NOI and Total NOI |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
Net income (loss) |
|
$ |
(10,602 |
) |
|
$ |
(34,867 |
) |
|
$ |
5,599 |
|
|
$ |
(67,711 |
) |
|
Termination fee income |
|
|
— |
|
|
|
(628 |
) |
|
|
(174 |
) |
|
|
(6,764 |
) |
|
Management and other fee income |
|
|
(914 |
) |
|
|
— |
|
|
|
(914 |
) |
|
|
— |
|
|
Depreciation and amortization |
|
|
49,551 |
|
|
|
50,571 |
|
|
|
84,218 |
|
|
|
109,234 |
|
|
General and administrative expenses |
|
|
8,673 |
|
|
|
5,093 |
|
|
|
16,470 |
|
|
|
11,367 |
|
|
Equity in loss (income) of unconsolidated joint ventures |
|
|
2,158 |
|
|
|
1,542 |
|
|
|
4,740 |
|
|
|
540 |
|
|
Gain on sale of real estate |
|
|
(34,187 |
) |
|
|
— |
|
|
|
(76,018 |
) |
|
|
— |
|
|
Interest and other income |
|
|
(456 |
) |
|
|
(42 |
) |
|
|
(1,136 |
) |
|
|
(120 |
) |
|
Interest expense |
|
|
17,862 |
|
|
|
18,431 |
|
|
|
34,281 |
|
|
|
35,023 |
|
|
Unrealized loss on interest rate cap |
|
|
172 |
|
|
|
124 |
|
|
|
7 |
|
|
|
595 |
|
|
Provision for income taxes |
|
|
240 |
|
|
|
147 |
|
|
|
344 |
|
|
|
266 |
|
|
NOI |
|
$ |
32,497 |
|
|
$ |
40,371 |
|
|
$ |
67,417 |
|
|
$ |
82,430 |
|
|
NOI of unconsolidated joint ventures |
|
|
5,007 |
|
|
|
6,987 |
|
|
|
9,765 |
|
|
|
13,498 |
|
|
Straight-line rent adjustment (1) |
|
|
(606 |
) |
|
|
(2,177 |
) |
|
|
(3,174 |
) |
|
|
(3,626 |
) |
|
Above/below market rental income/expense (1) |
|
|
(438 |
) |
|
|
(459 |
) |
|
|
(669 |
) |
|
|
(690 |
) |
|
Total NOI |
|
$ |
36,460 |
|
|
$ |
44,722 |
|
|
$ |
73,339 |
|
|
$ |
91,612 |
|
|
(1) |
Includes adjustments for unconsolidated joint ventures. |
Computation of Annualized Total NOI (in thousands)
|
|
|
As of June 30, |
|
|||||
|
Annualized Total NOI |
|
2018 |
|
|
2017 |
|
||
|
Total NOI (per above) |
|
$ |
36,460 |
|
|
$ |
44,722 |
|
|
Period adjustments (1) |
|
|
189 |
|
|
|
11 |
|
|
Adjusted Total NOI |
|
|
36,649 |
|
|
|
44,733 |
|
|
Annualize |
|
|
x 4 |
|
|
|
x 4 |
|
|
Adjusted Total NOI annualized |
|
|
146,596 |
|
|
|
178,932 |
|
|
Plus: estimated annual Total NOI from SNO leases |
|
|
68,870 |
|
|
|
54,147 |
|
|
Less: estimated annual Total NOI from associated space to be recaptured from Sears |
|
|
(6,370 |
) |
|
|
(4,839 |
) |
|
Annualized Total NOI |
|
$ |
209,096 |
|
|
$ |
228,240 |
|
|
(1) |
Includes adjustments to account for leases not in place for the full period. |
Reconciliation of Net Loss to EBITDAre and Company EBITDA (in thousands)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
EBITDAre and Company EBITDA |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
Net income (loss) |
|
$ |
(10,602 |
) |
|
$ |
(34,867 |
) |
|
$ |
5,599 |
|
|
$ |
(67,711 |
) |
|
Interest expense |
|
|
17,862 |
|
|
|
18,431 |
|
|
|
34,281 |
|
|
|
35,023 |
|
|
Provision for income and other taxes |
|
|
240 |
|
|
|
147 |
|
|
|
344 |
|
|
|
266 |
|
|
Depreciation and amortization |
|
|
49,551 |
|
|
|
50,571 |
|
|
|
84,218 |
|
|
|
109,234 |
|
|
Depreciation and amortization (unconsolidated joint ventures) |
|
|
3,516 |
|
|
|
8,363 |
|
|
|
7,309 |
|
|
|
13,828 |
|
|
Gain on sale of real estate |
|
|
(34,187 |
) |
|
|
— |
|
|
|
(76,018 |
) |
|
|
— |
|
|
EBITDAre |
|
$ |
26,380 |
|
|
$ |
42,645 |
|
|
$ |
55,733 |
|
|
$ |
90,640 |
|
|
Termination fee income |
|
|
— |
|
|
|
(628 |
) |
|
|
(174 |
) |
|
|
(6,764 |
) |
|
Unrealized loss on interest rate cap |
|
|
172 |
|
|
|
124 |
|
|
|
7 |
|
|
|
595 |
|
|
Company EBITDA |
|
$ |
26,552 |
|
|
$ |
42,141 |
|
|
$ |
55,566 |
|
|
$ |
84,471 |
|
13
Reconciliation of Net Loss to FFO and Company FFO (in thousands)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
FFO and Company FFO |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
Net income (loss) |
|
$ |
(10,602 |
) |
|
$ |
(34,867 |
) |
|
$ |
5,599 |
|
|
$ |
(67,711 |
) |
|
Real estate depreciation and amortization (consolidated properties) |
|
|
48,985 |
|
|
|
50,271 |
|
|
|
83,098 |
|
|
|
108,675 |
|
|
Real estate depreciation and amortization (unconsolidated joint ventures) |
|
|
3,516 |
|
|
|
8,363 |
|
|
|
7,309 |
|
|
|
13,828 |
|
|
Gain on sale of real estate |
|
|
(34,187 |
) |
|
|
— |
|
|
|
(76,018 |
) |
|
|
— |
|
|
Dividends on preferred shares |
|
|
(1,225 |
) |
|
|
— |
|
|
|
(2,453 |
) |
|
|
— |
|
|
FFO attributable to common shareholders and unitholders |
|
$ |
6,487 |
|
|
$ |
23,767 |
|
|
$ |
17,535 |
|
|
$ |
54,792 |
|
|
Termination fee income |
|
|
— |
|
|
|
(628 |
) |
|
|
(174 |
) |
|
|
(6,764 |
) |
|
Unrealized loss on interest rate cap |
|
|
172 |
|
|
|
124 |
|
|
|
7 |
|
|
|
595 |
|
|
Amortization of deferred financing costs |
|
|
1,870 |
|
|
|
2,479 |
|
|
|
3,590 |
|
|
|
4,061 |
|
|
Company FFO attributable to common shareholders and unitholders |
|
$ |
8,529 |
|
|
$ |
25,742 |
|
|
$ |
20,958 |
|
|
$ |
52,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per diluted common share and unit |
|
$ |
0.12 |
|
|
$ |
0.43 |
|
|
$ |
0.31 |
|
|
$ |
0.99 |
|
|
Company FFO per diluted common share and unit |
|
$ |
0.15 |
|
|
$ |
0.46 |
|
|
$ |
0.38 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares and Units Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
35,483 |
|
|
|
33,766 |
|
|
|
35,588 |
|
|
|
33,638 |
|
|
Weighted average OP units outstanding |
|
|
20,158 |
|
|
|
21,833 |
|
|
|
20,188 |
|
|
|
21,959 |
|
|
Weighted average common shares and units outstanding |
|
|
55,641 |
|
|
|
55,599 |
|
|
|
55,776 |
|
|
|
55,597 |
|
14